Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Rating agency Fitch has affirmed a stable outlook for Companhia Siderurgica Nacional (CSN), highlighting stronger earnings off higher iron ore prices.


Fitch gave a B issuer default rating and a national scale rating of BBB to CSN because of the miner’s robust iron ore business and positive free cash flow, which the pandemic won’t affect much.


Heavy rainfall in Brazil in the first half of 2020, along with supply constraints stemming from cyclones in Australia and Vale’s dam accident in Brumhadino, kept iron ore prices elevated through the latter half of 2019 and H1 2020. According to Fitch, these high prices should help CSN shore up its earnings this year, despite the COVID-19 crisis.


However, the Brazilian company’s steel sales could decline by 25pc at the end of this year because of its exposure to the flat steel sector, where automotive factory shutdowns and weak sales of white goods have plunged demand. According to the Brazilian Steel Institute, steel demand in the country could fall by as much as 20pc by the end of this year.


Fitch also indicated that CSN’s German and Portuguese subsidiaries are also facing a low demand environment because of the steep economic downturn in Europe. In Portugal, CSN operates two blast furnaces at Volta Redonda that have the capacity to produce 4.6mn mt of steel annually. However, the smaller of the two, which has a 1.4mn mt capacity, could be shut down to adapt to lower demand, Fitch said in its outlook for the company.


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